Dairy farmers unite against ‘unfair’ pricing

Increasing numbers are forming Dairy Producer Organisations (DPOs) to provide a stronger base from which to negotiate milk prices.

Food law consultancy Roythornes claimed the increasing numbers of farmers requesting its services to set up DPOs could have a “significant”​ effect on milk security.

Peter Bennett, head of food at Roythornes, said: “The resurgence in the uncertainty over the supply and pricing of milk has resulted in an increased interest in DPOs and the contribution they make towards a more stable relationship between producers and purchasers.​

Putting farmers on firmer ground ​

“They offer a way of encouraging more and better supply chain collaborations between producers and processers, as putting farmers on firmer ground within the supply chain rebalances the bargaining power.​

“The knock-on effects of milk security could be significant as its production accounts for a large chuck of the UK’s agricultural output.” ​

The EU permitted milk farmers to form DPOs on October 2012 by creating the Dairy Package to restore the balance of power between processors and producers. The aim was to provide non-co-operative milk farmers greater negotiating strength.

Dairy Industry Code of Best Practice​

Meanwhile, three more dairies have committed to the NFU’s Dairy Industry Code of Best Practice​ for contractual relations.

NFU dairy board chairman Mansel Raymond said: “We are delighted to see three more dairies become compliant, and we will be redoubling efforts to convince other milk buyers to commit to the code, so that farmers can have confidence and trust in their relationship with their milk buyer.”​ 

Barbers, Trewithen Dairy and Wyke Farms are all at the final stage of drafting and rolling-out their respective new milk supply contracts, according to the NFU.

Raymond said: “We are acutely aware of the short-term financial difficulties faced by many farmers. High costs during the winter have left many of our members in a very difficult place this summer and price rises are too slow coming from the market place. So we are calling on milk buyers to deliver a fair and sustainable milk price for farmers.”​ ​

Roythornes’ five tips for setting up a DPO:​

The EU regulation provides the legal requirements for the formation of DPOs, which are recognised by the Rural Payments Agency in the UK.

1. The DPO must be formed at the initiative of the producers.
2. The DPO must pursue a speci­fic aim, this is not specified by the EU but optimising production costs and stabilising prices is a good example of a DPO objective.
3. The DPO must either have 10 Members within the EU or produce 6Ml of milk, in which case it must have at least two members.
4. The producers must have evidence that they can carry out their activities properly in terms of their effectiveness and their ability to sustain supply.

The DPO must also create a statute which is consistent with all of the above conditions. The statute will set out the functions of the producer organisation and may detail any financial implications of membership, ie a producer may need to help fund the organisation in order to become a member.